Polysilicon Industry Set to Push Out New Entrants In 2024, Predicts Bernreuter

Germany research firm Bernreuter Research predicts an imminent, and third shakeout in the global polysilicon industry in 2024. This would be caused by sustained, low polysilicon prices that will only go lower, before any sort of recovery post 2024. The trigger will be Chinese polysilicon market leader Tongwei that will usher in a phase of fierce cut-throat competition in 2024. “By bringing in 575,000 tons of new production capacity on stream next year, whereas we expect a market growth of 200,000 tons at most,” says Johannes Bernreuter, head of Bernreuter Research and author of the Polysilicon Market Outlook 2027, released on November 28.

New Entrants Draw By Higher Prices To Suffer

The polysilicon shortage in 2021 and 2022, which drove the spot price up to almost US$40/kg for polysilicon prices, lured many Chinese aspirants into the industry. The new report from polysilicon market expert Bernreuter Research screens 36 companies; among them, 14 have started to construct or already to ramp up a new polysilicon plant. Besides Tongwei, however, other leading manufacturers have also expanded production. “If all new capacities were ramped up in 2024, oversupply would swell to 1.4 million tons,” says Bernreuter. “With its low manufacturing costs and proven product quality, Tongwei will push most, if not all, new entrants out of the market.”

In total, he estimates that the third shakeout wave in the polysilicon industry will eliminate a capacity of up to 2,400,000 metric tons (MT) (2.4 million tons), compared to 275,000 MT during the second wave – from 2018 through 2020 – and 135,000 MT during the first – between late 2010 and early 2013. For 2024, Bernreuter expects the polysilicon price to undercut the all-time low of US$6.75/kg reached in June 2020.

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While China’s share in the global polysilicon output will further increase to 90% in 2023 (to even 92.5% in solar-grade material), the non-Chinese manufacturers Wacker, OCI, Hemlock Semiconductor and REC Silicon will remain exempt from the shakeout. The reason for that is the Uyghur Forced Labor Prevention Act in the United States, which bans products from the Xinjiang Uyghur Autonomous Region in northwestern China. The legislation has created a separate, higher-price market for non-Chinese polysilicon manufacturers, which do not use silicon metal from Xinjiang as feedstock.

The shakeout in China is coming even though the polysilicon industry’s largest customer, the solar sector, is growing rapidly. In contrast to other market researchers, Bernreuter assumes that annual PV installations will rise from 425 GW in 2023 to 1,100 GW in 2027, which is equivalent to an average annual growth rate of 26.8%. “Traditional forecast models have mostly underestimated PV growth.Therefore, we have adopted a more aggressive approach,” explains the analyst. The rapid growth will fuel strong demand for silicon metal, which is made of quartz (SiO2). “The consequence is inevitable: Quartz for silicon metal will run short in the second half of this decade,” predicts Bernreuter.

The report findings should be no surprise to industry watchers who have been tracking prices, and capacity expansion plans in spite of those in recent months. With capacities outside China set to be added right up till 2027, a return of polysilicon prices to $35 plus seem  as close to unthinkable as they could be, auguring well for solar panel prices in the short to medium term. Since low polysilicon prices will drag down whatever effect inflation might have on other inputs.

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